Based on new statistics released by the U.S. Internal Revenue Service, the agency is having a banner year, but so are taxpayers. Refund levels are so strong that they might join lower gasoline prices to further improve consumer spending, although the IRS did not make that observation.
The IRS announced:
As of Jan. 31, the IRS received more than 14 million tax returns this year. More than 13 million of those returns have been filed electronically, an indication that more taxpayers are realizing the benefits that e-filing offers.
Consequently, the agency reasoned electronic filing has a modest financial benefit to the taxpayer:
The IRS has issued 7.6 million refunds worth $26.8 billion; the average refund is worth $3,539. More than 96 percent of all refunds have been paid through direct deposit. All total, 7.3 million refunds worth $26.2 billion have been directly deposited to taxpayer accounts.
Among the other data released:
- The average refund rose 10% from $3,218, so, much faster than the rate of inflation.
- The number of income tax filings received through January 31 was up 26% to 14 million, compared to the same time last year. Those processed increased by the same percentage to 13.9 million.
- Use of accountants appears to have spiked. E-filings from tax professionals rose 39% to 5.8 million. Self-prepared filings rose only 20% to 7.5 million.
The U.S. economy can use whatever leg up it can get to help drive improving GDP expansion. This becomes clearer as each new pessimistic assessment of growth in China, Japan and the European Union is posted. Since the American consumer continues to supply two-thirds of gross domestic product, economists believe that what is called the “middle-class tax cut” of lower gasoline prices should help GDP early this year (even if jobs continue to be lost in the energy sector). A large number of healthy tax returns should buttress consumer optimism going forward.
As long as consumers take those refunds and spend them instead of saving them as dry powder for the next recession.